Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Aggressive Defensive Scenario Probability Market Return 1 0.5 2 0.5 7% 20 Stock 3.2% Stock 5.0% 31 14 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A Beta D 2.14 0.69 b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Rate of return on A Rate of return on D 17.10 % 9.50 %

Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Aggressive Defensive Scenario Probability Market Return 1 0.5 2 0.5 7% 20 Stock 3.2% Stock 5.0% 31 14 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A Beta D 2.14 0.69 b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Rate of return on A Rate of return on D 17.10 % 9.50 %

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P

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